KM Enters., Inc. v. Global Traffic Techs., Inc.

• Decision Date: 02 August 2013
• Docket Number: No. 12–3406.,12–3406.
• Parties: KM ENTERPRISES, INC., Plaintiff–Appellant, v. GLOBAL TRAFFIC TECHNOLOGIES, INC. and Global Traffic Technologies, LLC, Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

725 F.3d 718

KM ENTERPRISES, INC., Plaintiff–Appellant,

v.GLOBAL TRAFFIC TECHNOLOGIES, INC. and Global Traffic Technologies, LLC, Defendants–Appellees.

No. 12–3406.

United States Court of Appeals,Seventh Circuit.

Argued Feb. 15, 2013.

Decided Aug. 2, 2013.

Jana Lynn Yocom, Attorney, Jana Yocom. P.C., Mt. Vernon, IL, for Plaintiff–Appellant.

Emily E. Chow, Attorney, Faegre Baker Daniels LLP, Minneapolis, MN, for Defendants–Appellees.

Before FLAUM, WOOD, and HAMILTON, Circuit Judges.

WOOD, Circuit Judge.

KM Enterprises, Inc. (KME), an Illinois corporation, sued Global Traffic Technologies, Inc. and its subsidiary, Global Traffic Technologies, LLC (collectively GTT), both Delaware entities headquartered in Minnesota, in the Southern District of Illinois, alleging violations of the Sherman and Clayton Acts and related state laws. The district court dismissed the suit for improper venue, reasoning that GTT did not reside in the district and that none of the events at issue in the suit took place there.

KME's appeal of that dismissal raises a surprisingly complex question about the relation between general principles of personal jurisdiction and venue and the special jurisdiction and venue provisions that appear in the Clayton Act. For the reasons that follow, we affirm the judgment of the district court.

I

KME and GTT are competitors in a specialized market for devices that permit emergency vehicles to send a signal that preempts ordinary traffic lights and thereby allows the emergency vehicle to pass through an intersection with, rather than against, the light. This speeds the progress of the emergency vehicle and enhances safety for other vehicles. There are at least two primary traffic-signal-interrupter technologies, one that relies on optical signals and one that uses GPS signals. GTT's optical products carry the brand name “Opticom.”

This case is but one of several ongoing legal disputes between KME and GTT. In 2010, GTT filed a patent infringement suit against KME in the District of Minnesota; KME then filed a separate suit against GTT, also in the District of Minnesota, which was consolidated with the patent case. Next, KME sued the New York State Department of Transportation and its commissioner twice in 2011 in the Eastern District of New York, challenging the Department's award of traffic-preemption contracts to vendors of GTT technology. KME followed with this suit in the Southern District of Illinois in 2012. The present suit alleges that GTT violated federal antitrust laws by improperly interfering with competitive bidding on public contracts and engaging in monopolistic activity similar to illegal tying.

KME alleges that GTT improperly persuades public agencies to specify GTT's Opticom technology when drafting their public contract requirements, thus ensuring that such contracts are awarded to bidders who will install GTT's units. But the plot thickens. KME further alleges that GTT then falsely informs these agencies that the Opticom product is no longer available and instead offers to supply a “dual” unit that houses both optical and GPS technology. Apparently the theory is that this is a type of bait-and-switch, or that some other aspect of the arrangement has the effect of locking the purchasers into GTT's GPS technology and harming competition in the GPS market. Notably, none of this illegal tying activity took place in Illinois. Though there are several dozen GTT-equipped traffic intersections located in the Southern District of Illinois (and some unspecified number of additional intersections in the state as a whole), none is equipped with the dual unit at the core of KME's antitrust allegations.

Shortly after the present suit was filed, GTT moved to dismiss based on, among other things, improper venue. Discovery and a hearing on the motion revealed that, other than the GTT devices at the intersections in the district, GTT's presence in the Southern District of Illinois was limited to six direct sales to buyers in the district over a four-year period, totaling $2,327.25, or .002% of GTT's sales, and two meetings between GTT and KME representatives in the district during which GTT offered to purchase KME's business. In addition, there are third-party contractors who bid on contracts in the district and install GTT's equipment. It was undisputedthat GTT does not directly install or maintain the equipment in the district, does not maintain offices or agents in the district, and does not directly promote its products in the district. The public procurement process by which traffic-signal-interrupter contracts are awarded takes place in Springfield, while the third-party distributor that supplies GTT's products to the district is located in Chicago. Based on these facts, the district court granted GTT's motion to dismiss on venue grounds, reasoning that GTT's contacts with the district could not support venue under 28 U.S.C. § 1391.

KME appeals. It challenges the district court's determination that GTT's contacts with the district are insufficient to support venue under the general venue statute, Section 1391, and it argues that venue is proper under Section 12 of the Clayton Act, which provides special rules for venue and service of process in antitrust actions against corporations. 15 U.S.C. § 22. (We note that only one of the GTT entities is a corporation (GTT, Inc.), and the other is an LLC. By analogy to the union (an unincorporated association) at issue in Denver & Rio Grande Western Railroad v. Brotherhood of Railroad Trainmen, 387 U.S. 556, 87 S.Ct. 1746, 18 L.Ed.2d 954 (1967), it seems that venue for the LLC should be determined by the residence of the entity itself rather than that of its individual members. See id. at 559, 87 S.Ct. 1746. Given the existence in this case of the corporate defendant, however, we need not delve further into that issue.) More importantly, KME advances a theory that would allow it to short-circuit the venue analysis by mixing and matching among the service-of-process and venue provisions of Section 12 and Section 1391. The latter theory is a controversial one that has divided our sister circuits. Because our disposition of this appeal hinges on whether we adopt it, we address it first.

II

The intersection between general principles of federal personal jurisdiction and venue and the Clayton Act's specific provisions has become tangled over the years. It is helpful, therefore, to begin with a review of the relevant procedural principles and the language of the governing statutes. “Personal jurisdiction” refers to the court's power over the parties. See Leroy v. Great W. United Corp., 443 U.S. 173, 180, 99 S.Ct. 2710, 61 L.Ed.2d 464 (1979). That power derives ultimately from the state (in the general sense of the term), the party's contacts with the state, and the reasonableness of the assertion of judicial authority, but the mechanics for asserting personal jurisdiction in federal court are found in Federal Rule of Civil Procedure 4(k). Subpart (1)(A) of the rule provides that “[s]erving a summons or filing a waiver of service establishes personal jurisdiction over a defendant ... who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” This means, in essence, that federal personal jurisdiction is proper whenever the person would be amenable to suit under the laws of the state in which the federal court sits (typically under a state long-arm statute), subject always to the constitutional due process limitations encapsulated in the familiar “minimum contacts” test. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945); see also, e.g., Mobile Anesthesiologists Chi., LLC v. Anesthesia Assocs. of Hous. Metroplex, P.A., 623 F.3d 440, 443 (7th Cir.2010). Subpart (1)(C) provides that personal jurisdiction is proper if authorized by a federal statute, again subject to due process limitations.

While personal jurisdiction governs a court's power over a defendant, federal venue rules determine in which judicial district (among those that have the power to hear a given suit) a suit should be heard. Leroy, 443 U.S. at 180, 99 S.Ct. 2710. Unlike personal jurisdiction, which has a constitutional dimension, civil venue is a creature of statute, intended to limit the potential districts where one may be called upon to defend oneself in any given matter to those that are fair and reasonably convenient. Id. The general federal venue statute, 28 U.S.C. § 1391, provides that venue in a civil case is proper in:

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.

28 U.S.C. § 1391(b). (Section 1391 was amended by the Federal Courts Jurisdiction and Venue Act of 2011, Pub.L. No. 112–63. The Act eliminated a longstanding distinction between venue in civil cases brought under federal question jurisdiction and those brought under diversity jurisdiction and rearranged several subsections. While the Act's amendments, which became effective in January 2012, apply to this case, they have no substantive effect on our analysis. Because we apply the Act as amended, however, the subsections to which we refer are numbered slightly differently than they were when courts addressed this topic previously.) The statute further provides that a corporate defendant is deemed to “reside” “in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to...